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Publication Details
AFRICAN RESEARCH NEXUS
SHINING A SPOTLIGHT ON AFRICAN RESEARCH
business, management and accounting
The value relevance of mandatory non-GAAP earnings
Abacus, Volume 50, No. 1, Year 2014
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Description
This paper examines the value relevance of earnings components where there is a mandatory requirement to report generally accepted accounting principles (GAAP) earnings and non-GAAP earnings, and where the items to be eliminated from GAAP earnings are defined in detail. The setting is different from non-GAAP earnings disclosures presented in the United States and elsewhere, where managers have discretion over whether to report a non-GAAP earnings number, and what to exclude from GAAP earnings. Our mandatory setting enables us to report value relevance results that are not confounded by managers' discretionary choices regarding non-GAAP earnings exclusions. We use price-level regressions, based on the Ohlson (1995) model, to test for incremental and relative value relevance. The results show that non-GAAP earnings reported under a mandatory regime have higher value relevance than GAAP earnings. The disaggregation of these items is useful to investors in a setting where managerial motivations are minimized. © 2014 Accounting Foundation, The University of Sydney.
Authors & Co-Authors
Venter, Elmar Retief
South Africa, Pretoria
University of Pretoria
Emanuel, David
New Zealand, Auckland
The University of Auckland
Cahan, Steven F.
New Zealand, Auckland
The University of Auckland
Statistics
Citations: 70
Authors: 3
Affiliations: 2
Identifiers
Doi:
10.1111/abac.12020
ISSN:
00013072
e-ISSN:
14676281